servicemax

The idea of an omnipotent software platform and the evolution of Customer Science go hand in hand. Customer Science is the upshot of my idea that we’re in the process of converting from random acts of CRM in the front office to a more structured, efficient, and predictable approach to conducting front office business. Platforms make Customer Science possible.

The emphasis on collecting and analyzing customer big data has taken up most of the brain space in the discussion about the front office but it is only half of the Customer Science story. The other part is what vendors do with the information they distill from customer data. They might simply use a fragment of analysis to tell customers that other people almost like them bought product B when they bought product A but that’s like carpet bombing when a laser guided approach would work so much better.

A better approach to the new vendor customer relationship implied by Customer Science is to use the information to first construct journey maps and metrics and to then put in place business processes mediated by powerful software that leverages all of the new kit that’s come to market over the last few years, in short the platform. That includes workflow, social, transaction oriented analytics, and mobility solutions for starters. All of these specialized components have to be part of the underlying platform on which the solutions rest. Thus platform has become a big deal.

Platform is arguably much more important than the messaging surrounding it might suggest. The vibe I get from the messaging is that platforms are cool and, well, don’t you want to be cool? That’s early market messaging, the kind of thing that vendors spout when the use case is still being fleshed out, but platform is already much more than this.

In reality, if the Customer Science light bulb shines brightly above your head, platform is essential for the simple reason that the modern, Customer Science driven front office can’t possibly write by hand all of the software you’d need to support a single business process across desktop, laptop, iOS, and Android let alone integrating apps from Salesforce, Oracle, Microsoft, and SAP. Thus platform has become the new application table stakes for our industry and making apps on platforms that are open to the rest of the universe is a business necessity.

The big attraction of a platform, at least one constructed properly in my humble judgment, is that for the most part it exists a level above raw code and that it can generate the code for the business process on all of the platforms that a business wishes to deploy — one specification for all user interfaces the business is likely to need from the handheld device to the desktop.

Additionally, a platform, rather than the application, should be the point of integration with third party apps so the platform must be able to support apps working together whether they are all written natively or they come from widely different sources. The capability to do all of this was once science fiction but today’s leading platform vendors make it look easy.

From a business perspective, it’s a game changer. Software companies (and most other companies) have always sought out ways to lock in customers. Prior generations relied on compilers and database standards to carry that load with the result that getting applications to simply exchange data was viewed as reason to celebrate. No wonder it has always been so difficult to string together multi-vendor support for common business practices.

Platform is bigger than all that and one example of its impact is the Force United Consortium a group of vendors with applications built on top of the Salesforce1 Platform. They include Apttus, FinancialForce, and ServiceMax among others. Their extra value add is that their disparate applications not only integrate well with Salesforce products but that their solutions are almost indistinguishable from Salesforce and each other at the foundation level because they are platform native meaning they use the same objects from the Salesforce toolkit. Of course, they do vastly different things too and that’s the point.

The consortium elevates the members as well as Salesforce to the status of an uber application, sharing data but even more importantly sharing metadata that supports the business processes on a common platform that make Customer Science possible.

We’ve come a long way from the times when computer automation was mainly about making data more accessible to better support manual business processes. Big Data gave us the insights to understand customers in ways we never could before and platforms are enabling process automation not simply data storage and retrieval.

There are still things that only people can do in this highly automated environment but the new science and platforms make the people involved in the processes much more productive and importantly they provide better and more intimate association with customers. Ironically, process automation is still not widely accepted, it is only gradually becoming part of the landscape though of course, leading practitioners have already gotten and digested the email. Perhaps next year it will see greater emphasis for the rest of us.

Once a year I write a post that tries to predict some of the big happenings of the year ahead. The success of these efforts relies on clear thinking and objectivity — trying to figure out what will come to pass rather than what I want to see happen. It’s hard but thankfully no one ever checks up on me a year later.

First, let’s take a look at the general economic outlook. The global economy is improving, unemployment is trickling down at least in the U.S. and there are some bright spots like improvements in manufacturing and construction. The Federal Reserve is poised to get a new leader and Janet Yellen has been nominated though at this writing it is far from certain that she’ll pass the senate because she’s a Keynesian after all.

But in a recent Op-Ed in the New York Times, Martin Feldstein, a professor of economics at Harvard, who was chairman of the Council of Economic Advisers from 1982 to 1984, under President Ronald Reagan, suggested a very Keynesian stimulus so perhaps some further stimulation of the economy could be in the offing.

Long story short, the economy is looking better than it has for some time but it’s not great. On the other hand, there is a goodly amount of capital floating around looking for homes in late stage start-ups and the class of potential IPOs looks strong with names like InsideView, Xactly, Apttus, TOA Technology, ServiceMax, FinancialForce and many others. None of the CEO’s want to talk about that stuff, it’s like each is a pitcher in the dugout in the 8th inning of a perfect game.

All of these companies offer SaaS solutions and all are available on the AppExchange which suggests that my universe needs to expand. Nevertheless, the Exchange is a good place to look for signs of opportunity. I suspect application stores or exchanges are going to be very important incubators for new ideas in front office computing so I’ll continue watching them for new signs of life. You never know what you’ll find.

I expect a continuation of a trend that started last year in which marketing became the new darling of the front office suggesting that customer service (which is always important) is cycling out. Service is where vendors go during downturns so that they can try to protect existing revenue streams and, of course, SFA takes a back seat. But after a year of marketing hoopla I think the stage is set to put more wood behind the sales arrow to begin reeling in some of the leads that new marketing systems have been nurturing. So I am looking for new activity in the SFA part of CRM. But not just any activity.

I am still digesting the Bluewolf report “The State of Salesforce” that came out just before Dreamforce. One of the most intriguing findings from the report is that community is the new CRM. If that’s true, it is fairly easy to postulate significant changes to the way we sell. Perhaps sales people will become more involved with communities sponsored by their companies as a way to accelerate sales processes and lower the costs of making customer calls. What sales manager wouldn’t like that?

But I think the hidden message is that community will evolve more as a marketing and service hub, than as a sales tool. Sales will be a by-product of a lot of customer-to-customer interaction. Currently communities are mostly thought of as a part of marketing or as a part of service but I do not think it too far fetched to consider the possibility that community will become its own entity on a par with sales, service, and marketing — its primary consumers. Away from its departmental blinders, the community might be more able to take action to benefit all departments instead of just one.

Run well a community can provide a lot of information to a company and at some point it might make sense to give it its own charter and budget rather than having it mooch off the budgets of marketing or service. I suspect when that happens it will get a new name. Right now we have IT, which takes a technology perspective and that perspective is valuable. But this new entity will be more focused on information development or intelligence. This seems right and I like everything about it except the moniker. No one is going to want to work for ID, just a hunch but I can’t see calling the new department the intelligence department. Given the NSA’s reputation right now, we’ll keep clear of that.

This transition won’t happen over night so it won’t be complete in 2014, which sort of gets me off the hook in prognostication. But from another perspective, the oft quoted Gartner idea that the CMO will have a bigger technology budget than the CIO in a couple of years, I think, goes to the heart of what I am saying. But it won’t be the CMO’s budget, it will be the CIDO’s or whatever we decide to call him or her.

For the record, I am an ERP dilatant — I know about it but don’t follow it with the same passion that I follow CRM. And as far as SAP (NYSE: SAP) is concerned, I have rarely met a bunch of smarter business people who are also rather nice. I have no issues with either, but as an observer of macro trends, this was a surprising article for several reasons.

First, someone else wrote it. The headline sums up my observations about ERP, but until I read the post by Dave Yarnold, CEO of ServiceMax, I thought I was unique in that line of thought. Glad I am not.

Second, and more interesting, is Yarnold’s assertion that legacy ERP has been an impediment to business, at least in recent years. That really got me, because I thought that was my mantra.

Third, it points to the cloud and modern technologies as the emerging solution.

It all goes quickly to the business model of the 21st century: services on demand. Vendors — at least the smart ones — are looking for ways to convert their product-centric businesses to services for some very good reasons. When you sell a service, like software for example, we all know the customer is liberated from the need to purchase hardware, operating systems, middleware, database and applications. Customers are also liberated from the need to hire high-priced talent to administer and maintain all that technology.

I hate to sound happy about reducing demand for all those talented people in the middle of a recession (I know it ended a while ago, I’m just waiting to feel it). But that’s what businesses and economies do. If something can be shown to be extraneous to the business’ core mission, you must reduce or eliminate it or you will become uncompetitive as a result.

It’s not just software that comes as a service either. Some of my favorite examples are the companies that were profiled in The New Yorker about a year ago that provide wardrobe as a service. If you like Gucci bags or designer clothes but can’t afford to own, these companies will provide articles of clothing as a subscription.

But let’s get back to the impediment for a moment. According to Yarnold, who was speaking about a colleague, “He’s an IT veteran who has been running SAP software since the ’90s, who came to the realization that the efficiencies it afforded them have completely eliminated the creativity, growth and innovative thinking the company once prided itself on.”

That’s bad enough, but Yarnold goes on, “Companies had to conform their business processes to the way SAP’s rigid software ran. Much of the uniqueness that enabled companies to differentiate themselves was squeezed out in the name of SAP. I can’t even guess at the number of meetings I’ve had with senior company leaders over the years where creative new business ideas were shelved because ‘it didn’t fit into SAP.’ Is it possible that this long-term adherence to the SAP way has in some way been at the root of the lack of creativity, competitiveness or the loss of manufacturing jobs we now bemoan in our economy?”

I wouldn’t go that far — you can’t lay everything at the feet of SAP, and this analysis does not take into account life before SAP. Companies bought it because it solved a business problem (let’s call it “legacy ERP” because there are other vendors in the space, like Oracle).

Legacy ERP, like all products you can mention, was designed and built for a particular place in time, specific business needs and processes tied to manufacturing. If legacy ERP no longer meets the need, it’s because business changed. We’re a services economy today, and about 70 percent of GDP is tied to services, not manufacturing. Companies like Zuora go even further and have called the present model “the subscription economy.”

Subscriptions enable businesses to change more rapidly, and the above-mentioned “creative new business ideas were shelved because ‘it didn’t fit into SAP'” are a reality.

The subscription economy is real. In this world companies like Workday and Zuora have taken prominent positions, and the marketplace is taking note. This morning, Zuora announced its Series D financing as well as increasing its footprint in Europe. The company raised US$36 million in new funding, including money from Dave Duffield, founder and coCEO of Workday, and Marc Benioff, chairman and CEO of Salesforce.com (NYSE: CRM). Also, in the first three quarters of this year in which Zuora had a presence in Europe, the company announced that it has $2.5 billion in contracted revenue from its early customers.

Legacy ERP might still control the market, and it may take a long time for the upstarts to gain significant share. A comparison with Salesforce is instructive. Salesforce was a key reason Siebel topped out as a $2 billion company, though it was many years before Salesforce gained the same revenue level. In the same way, the presence of Zuora, Workday and companies like them indicates the high water mark for legacy ERP.

Legacy ERP is ill-suited to the demands of the subscription economy, and it is comparatively expensive. As the ERP replacement cycle gains steam, no vendor, incumbent or otherwise, should take its position in an account for granted.

Mark Twain once quipped, “Everyone complains about the weather, but no one does anything about it.” We could say much the same about legacy ERP, but now it appears that there are credible alternatives coming on line.

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Beagle Research Group, LLC is a CRM analyst firm founded in 2004. We perform market research for vendors and advise end users in CRM selection, deployment and use. We also publish a steady stream of analysis on many of the industry’s most popular topics as well as emerging trends. For example, one of our core pursuits is researching emerging companies to understand current innovation trends. This research informs the advice we give our clients and readers.